HOUSE OF LORDS

OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT

IN THE CAUSE

BEREZOVSKY

(RESPONDENT)

v.

MICHAELS AND OTHERS

(APPELLANTS)

GLOUCHKOV

(RESPONDENTS)

v.

MICHAELS AND OTHERS

(APPELLANTS)

(CONSOLIDATED APPEALS)

ON 11 MAY 2000

LORD STEYN

My Lords,

In the wake of the collapse of the Soviet Union the transition of Russia from communism to a market-orientated economy and society has been accompanied by a dramatic upsurge in organised crime and corruption. There has been great interest internationally in these consequences of the transformation of Russian society. Newspapers and journals specialising in international news, political and economic, published many reports on the criminalisation of Russian society. Forbes, an influential American fortnightly magazine, devoted considerable resources to the investigation and reporting of the situation in the post-Soviet phase in Russia. In 1996 its reporting centred on the role of two considerable figures in the new Russia. The first and most powerful was Mr. Boris Berezovsky. He is a businessman and politician. He has extensive interests in Russian businesses, including cars, oil, media and finance. In October 1996 he became Deputy Secretary of the Security Council of the Russian Federation which is a senior post in the Russian Government. His subsequent career is not directly relevant but I mention it for an understanding of the context. In November 1997 President Yeltsin dismissed Mr. Berezovsky. In April 1998 Mr. Berezovsky was appointed as Secretary of the Commonwealth of Independent Sates, with responsibility for co-operation between the various parts of the Russian Federation. The second figure of interest to Forbes was Mr. Nikolai Glouchkov. In December 1996 he was the First Deputy Manager of Aeroflot, the Russian international airline. He is now the Managing Director of Aeroflot.

In its issue of 30 December 1996 Forbes described the two men as "criminals on an outrageous scale". On the contents page Mr. Berezovsky was introduced as follows:

"Is he the Godfather of the Kremlin? Power, Politics, Murder. Boris Berezovsky can teach the guys in Sicily a thing or two."

The flavour of the article, which together with a prominent photograph of Mr. Berezovsky was spread over seven pages, is captured by an editorial published by Mr. James W. Michaels, the editor of Forbes. It states:

". . . this is the true story of the brilliant, unscrupulous Boris Berezovsky, a close associate of President Boris Yeltsin and a man who parlayed an auto dealership into Russia's most formidable business empire. Berezovsky stands tall as one of the most powerful men in Russia. Behind him lies a trail of corpses, uncollectible debts and competitors terrified for their lives.

"A number of Forbes editorial staffers were involved in the reporting and picture-gathering over a period of many months. As one of them puts it. "In Moscow, asking questions about Berezovsky was like being back there in pre-Gorbachev days. At the very mention of Berezovsky's name, people would look around furtively, lower their voices and try to change the subject.
"Russians have good reason to be afraid of Berezovsky and people like him: Emulating the old communist bosses, the new crime bosses use KGB-trained assassins and enforcers. In the prevalence of brutality and extralegal power grabs, Russia hasn't finished paying the price for those 70 years of communism.
"This is one of the finest pieces of reporting I have seen in my half-century in journalism."

In the article Forbes described Mr. Glouchkov as follows:

"Now meet Aeroflot's deputy director, Nikolai Glushkov. This gentleman has an interesting background. He was convicted in 1982 under Article 89 of the Russian criminal code (theft of state property). Later Glushkov served as head of finance for Avtovaz and was one of the founders of Logovaz. In short, an associate of Berezovsky. Are Glushkov and Berezovsky in cahoots to siphon money from Aeroflot? The parallels with Avtovaz are certainly striking."

The circulation figures of the issue of Forbes of 30 December 1996 would have been of the following order:

Subscriptions

Newstands

Total

United States & Canada

748,123

37,587

785,710

England & Wales

566

1,349

1,915

Russia

13

0

13

The magazine was also available to be read on the Internet in England and Wales and elsewhere. The readers of Forbes are predominantly people involved in business. Typically, many of its readers would have come from those working in corporate finance departments of banks and financial institutions. There is an agreed estimate that the magazine would have been seen by about 6,000 readers in the jurisdiction.

The proceedings

Mr. Berezovsky and Mr. Glouchkov both speak English well. Mr. Berezovsky claimed to have extensive personal and business connections with England; Mr. Glouchkov asserted that he had significant connections with England. Both men decided to sue in England rather than in Russia or the United States. On 12 February 1997 they issued separate proceedings for damages for libel and injunctions against Forbes Inc. (the publisher of the magazine) and Mr. Michaels (the editor). The plaintiffs confined their claims for damages to the publication of Forbes within the jurisdiction through distribution of copies of the magazine and through publication on the Internet. They applied under R.S.C., Ord. 11, r. 1(1)(f) for leave to serve the writs out of the jurisdiction. The relevant part of the order makes it permissible to serve a writ out of the jurisdiction where "the claim is founded on a tort and the damage was sustained, or resulted from an act committed, within the jurisdiction": see also Ord. 11, r. 4 which provides that no leave shall be granted unless the case is "a proper one for service out of the jurisdiction". On 7 April 1997 the Forbes parties (to whom I will collectively refer as "Forbes") applied under Order 12, rule 8, to have the writs set aside and the actions dismissed or stayed, on the grounds that England is not the most appropriate jurisdiction for trial of the plaintiffs' claims. It was contended that Russia or the United States were jurisdictions where the action could more appropriately be tried. A large number of affidavits were exchanged. Expert evidence on the law of Russia and the law of the United States was served. Hundreds of pages of press cuttings and other documents were exhibited.

At first instance, and in the Court of Appeal, the principal factual dispute was the extent of the connections of the plaintiffs with England and their reputations here. The plaintiffs claimed to have substantial connections with the jurisdiction through visits, business relationships and, in the case of Mr. Berezovsky, personal and family ties. Forbes maintained that the connections were insignificant compared with their connections with Russia, and were insufficient to make this jurisdiction the most appropriate for the trial of the action.

On 22 October 1997 Popplewell J. heard the applications by Forbes. He gave two judgments. In the first he correctly held that, notwithstanding that an English tort was established, he had jurisdiction to stay the action on the principles laid down by the House in Spiliada Maritime Corporation v. Cansulex Ltd. [1987] A.C. 460. In the second judgment Popplewell J. considered the merits of the applications. He concluded that the connections of the plaintiffs with the jurisdiction were tenuous. The judge clearly thought Russia was the more appropriate forum because in a judgment given on 19 December 1997 he required Forbes to submit to the jurisdiction of the Russian courts and to abide by the judgment of the Russian courts.

The plaintiffs appealed to the Court of Appeal. About four weeks before the appeal was heard the plaintiffs served further evidence about the detrimental effect which the Forbes article had on the reputation of the plaintiffs in London. Forbes also served a further affidavit. Notwithstanding the objections of Forbes the Court of Appeal in exercise of its discretion admitted the new evidence. On 19 November 1998 the Court of Appeal allowed the appeal of both plaintiffs. Hirst L.J., who has vast experience of this class of work, gave the leading judgment and May L.J. and Sir John Knox agreed. Hirst L.J. held that Popplewell J. had misdirected himself on the evidence and that the Court of Appeal was entitled to consider the matter afresh. Hirst L.J. concluded that there was a substantial complaint about English torts in the case of both plaintiffs. Accordingly, there was jurisdiction to try the action in England and in all the circumstances England was the appropriate jurisdiction for the trial of the action. The judgment of the Court of Appeal is only reported in [1999] E.M.L.R. 278 at present.

The shape of the appeal to the House

The shape of the case changed during the oral argument in the House. At the end of speeches the principal matters in issue were as follows:

(1)

Did the Court of Appeal err in admitting the plaintiffs' new evidence?

(2)

Should the House of Lords grant a petition by Forbes to produce new evidence on the appeal to the House and, if so, should the House grant a counter-petition by the plaintiffs.

(3)

Depending on the answers to the first two issues, what is objectively the realistic view on the primary issue of fact, viz the plaintiffs' connections with England and reputation here?

(4)

Did the Court of Appeal correctly apply the Spiliada test?

(5)

Was the Court of Appeal entitled to interfere with the exercise by Popplewell J. of his discretion?

(6)

Even if the decision of the Court of Appeal in respect of Mr. Berezovsky's action was correct, what is the position with regard to Mr. Glouchkov?

While I will deal with all these issues, I propose to concentrate on the questions of legal principle arising under issue (4).

Issue (1): The admission of the new evidence by the Court of Appeal:

Counsel for Forbes renewed a submission that the new evidence presented to the Court of Appeal did not satisfy the well-known criteria laid down in Ladd v. Marshall [1954] 1 W.L.R. 1489. That decision is inapplicable to the admission of new evidence on an appeal from a decision to set aside leave to serve out of the jurisdiction. The Court of Appeal had a broader discretion. In the present case the evidence was in amplification of a case already outlined in previous affidavits. But it added important colour to the picture before Popplewell J. The new evidence was served four weeks before the hearing of the Court of Appeal. Forbes had an adequate opportunity to answer the evidence. In these circumstances the Court of Appeal was acting well within its discretion in admitting the evidence. I would reject the submission to the contrary.

Issue (2): The petition by Forbes to introduce new evidence:

The petition by Forbes is to introduce new evidence on the appeal to the House, particularly on the previously wholly unparticularised defence of justification. The petition was served on 22 February 2000, i.e. shortly before the hearing in the House. The evidence should have been served before the hearing in the Court of Appeal, notably because the trial judge had in October 1997 commented adversely on the failure of Forbes to produce any evidence of the supposed plea of justification. There is no satisfactory explanation for the failure to produce this evidence before the hearing in the Court of Appeal. Moreover, the Court of Appeal observed in November 1998 that in the absence of a particularised defence of justification the judge was right to discount the justification defence for present purposes. Notwithstanding this observation it took more than 15 months for Forbes to serve their new evidence. It was produced too late. The possibility of prejudice to the plaintiffs cannot be ignored. The admission of new evidence, depending on the circumstances, tends to be an exceptional course in the House of Lords. Nothing warranting admission of the new evidence has been put before the House. The petition should be rejected. In consequence the counter-petition falls away. It follows that the House must consider the issues on the evidence as it stood before the Court of Appeal.

Issue (3): The primary issue of fact as to the plaintiffs' connections with England and reputations here

Before the judge there was an affidavit by Mr. Berezovsky in which he stated:

"Over the past several years I have had extensive contacts with England, in business, in government service and personally. During the years in which I pursued my career in international business and finance, I worked frequently in London and with persons and companies based in London. This is entirely understandable, given London's status as the international business and financial capital of Europe, where all of my business interests have been based, and of which Russia is an increasingly important part."

Mr. Berezovsky then gave concrete examples of fruitful negotiations in London on behalf of Russian enterprises as well as participation in joint enterprises. In 1994/5 he visited London on 22 occasions and in 1996/7 on 9 occasions, the reduced rate being due to his involvement in government. He kept an apartment in London. His wife from whom he has separated lives in London with their two children. He often visited them. He also had two daughters from a previous marriage at Cambridge University. As Hirst L.J. observed it was surprising on this evidence that the judge found that Mr. Berezovsky's connections with England were tenuous.

The new material admitted in the Court of Appeal included concrete evidence from three independent sources as to the effect of the Forbes article on Mr. Berezovsky's business reputation. The three deponents were a commercial solicitor, the managing director of a Swiss company and the managing director of a Russian oil company. It is not necessary to set out their evidence in detail. It is sufficient to say that the Forbes article was known to executives of financial institutions and deterred them from entering or continuing London-based negotiations with Mr. Berezovsky.

Hirst L.J. [1999] E.M.L.R. 278, 290 was right to conclude that on this evidence, together with the original evidence, Mr. Berezovsky had "a substantial connection with this country, and an important business reputation to protect here."

Mr. Glouchkov's connections with England were of a lesser order. In his original affidavit he explained:

"Over the past several years I have had extensive contacts with England. . . . I frequently visit and work at Aeroflot's offices in Piccadilly in London. Among other projects, I worked with Mr. Berezovsky and others to assist Aeroflot in obtaining adequate and cost effective insurance coverage in the English insurance market. We succeeded in achieving this goal by obtaining new insurance policies for Aeroflot in England through the London-based Alexander Howden insurance brokerage firm.

"I have also travelled to London pursuant to my work for Aeroflot for meetings with the S.G. Warburg investment banking firm in London.
"I have also visited London pursuant to my work for Aeroflot for meetings at the London headquarters of the European Bank for Reconstruction and Development, which is helping to structure financing for Aeroflot. I am personally involved in extensive negotiations with the EBRD in London in connection with this matter.
"In addition, I have travelled to London pursuant to my work for Aeroflot to negotiate certain banking financing for the company. In particular, I have worked with the London offices of the Chase Manhattan Bank, which is assisting Aeroflot in connection with its purchase of aircraft, the London Office of Citibank, and the London office of Kredietbank.
"I have also maintained a flat in London since 1993."

Mr. Glouchkov's affidavit was corroborated by an experienced international businessman. On the basis of this evidence Hirst L.J. observed, at p. 291, that the judge's view that Mr. Glouchkov only had tenuous connections with the jurisdiction did not do full justice to the evidence. In agreement with Hirst L.J. I would also describe Mr. Glouchkov's connections as significant.

Issue (4): Did the Court of Appeal apply the Spiliada test correctly?

In the Court of Appeal counsel for Forbes submitted "that the correct approach is to treat multi-jurisdiction cases like the present as giving rise to a single cause of action and then to ascertain where the global cause of action arose". In aid of this argument he relied by analogy on the experience in the United States with the Uniform Single Publication Act which provides, in effect that, in respect of a single publication only one action for damages is maintainable: see also William L. Prosser, Interstate Publication, (1953) 51 Michigan L.Rev. 959 and Restatement Second on Torts, 1977, section 577A. The Uniform Single Publication Act does not assist in selecting the most suitable court for the trial: it merely prevents a multiplicity of suits. There is no support for this argument in English law. It is contrary to the long established principle of English libel law that each publication is a separate tort. Moreover, it is inconsistent with the policy underlying the acceptance by the European Court of Justice in Shevill v. Presse Alliance S.A. (Case C-68/93) [1995] 2 A.C. 18, admittedly a Convention case, that separate actions in each relevant jurisdiction are in principle permissible: see also Shevill v. Presse Alliance S.A. [1996] A.C. 959 and Reed and Kennedy, International Torts and Shevill: the ghost of forum shopping yet to come (1996) M.C.L.Q. 108. And, as Hirst L.J. observed, the single cause of action theory, if adopted by judicial decision in England, would disable a plaintiff from seeking an injunction in more than one jurisdiction. In the context of the multiplicity of state jurisdictions in the United States there is no doubt much good sense in the Uniform Single Publication Act. But the theory underpinning it cannot readily be transplanted to the consideration by English courts of transnational publications. Rightly, the Court of Appeal rejected this submission. In oral argument counsel for Forbes made clear that he was not pursuing such an argument before the House.

On appeal to the House counsel for Forbes approached the matter differently. The English law of libel has three distinctive features, viz (1) that each communication is a separate libel (Duke of Brunswick v. Harmer (1849) 14 Q.B. 185; McLean v. David Syme & Co. Ltd. (1970) 92 W.N.(N.S.W.) 611; (2) that publication takes place where the words are heard or read (Bata v. Bata (1948) W.N. 366; Lee v. Wilson and Mackinnon (1934) 51 C.L.R. 276); and (3) that it is not necessary for the plaintiff to prove that publication of defamatory words caused him damage because damage is presumed (Ratcliffe v. Evans [1892] 2 Q.B. 524 at 529, per Bowen L.J. The rigour of the application of these rules is mitigated by the requirement that in order to establish jurisdiction a tort committed in the jurisdiction must be a real and substantial one: Kroch v. Rossell (1937) 1 All E.R. 725. On the findings of fact of the Court of Appeal, which I have accepted, it is clear that jurisdiction under Ord. 11, r. 1(1)(f) is established and counsel accepted that this is so. But counsel put forward the global theory on a re-formulated basis. He said that when the court, having been satisfied that it has jurisdiction, has to decide under Order 11 whether England is the most appropriate forum "the correct approach is to treat the entire publication - whether by international newspaper circulation, transborder or satellite broadcast or Internet posting - as if it gives rise to one cause of action and to ask whether it has been clearly proved that this action is best tried in England." If counsel was simply submitting that in respect of transnational libels the court exercising its discretion must consider the global picture, his proposition would be uncontroversial. Counsel was, however, advancing a more ambitious proposition. He submitted that in respect of transnational libels the principles enunciated by the House in Spiliada should be recast to proceed on assumption that there is in truth one cause of action. The result of such a principle, if adopted, will usually be to favour a trial in the home courts of the foreign publisher because the bulk of the publication will have taken place there. Counsel argued that it is artificial for the plaintiffs to confine their claim to publication within the jurisdiction. This argument ignores the rule laid down in Diamond v. Sutton [1866] L.R. 1 Ex. 130 at 132, that a plaintiff who seeks leave to serve out of the jurisdiction in respect of publication within the jurisdiction is guilty of an abuse if he seeks to include in the same action matters occurring elsewhere: see also Eyre v. Nationwide News Proprietary Ltd. [1967] N.Z.L.R. 851. In any event, the new variant of the global theory runs counter to well established principles of libel law. It does not fit into the principles so carefully enunciated in Spiliada. The invocation of the global theory in the present case is also not underpinned by considerations of justice. The present case is a relatively simple one. It is not a multi-party case: it is, however, a multi-jurisdictional case. It is also a case in which all the constituent elements of the torts occurred in England. The distribution in England of the defamatory material was significant. And the plaintiffs have reputations in England to protect. In such cases it is not unfair that the foreign publisher should be sued here. Pragmatically, I can also conceive of no advantage in requiring judges to embark on the complicated hypothetical enquiry suggested by counsel. I would reject this argument.

Counsel next put forward a more orthodox argument. He acknowledged that the Court of Appeal invoked the well-known principles laid down in Spiliada. Hirst L.J. correctly stated that the court must identify the jurisdiction in which the case may be tried most suitably or appropriately for the interests of all the parties and the ends of justice: [1987] A.C. 460, 474D and 484E. Hirst L.J. [1999] E.M.L.R. 278, 293 also emphasised that in an Order 11 case the burden of proof rests upon the plaintiff to establish that the English jurisdiction clearly satisfies this test. So far there can be no criticism of the approach of the Court of Appeal. But counsel submitted that Hirst L.J. fell into error by relying on a line of authority which holds that the jurisdiction in which a tort has been committed is prima facie the natural forum for the determination of the dispute. The best example is The Albaforth [1984] 2 Lloyd's Rep. 91 where the Court of Appeal considered a claim founded on a negligent mistatement in a status report by a bank relating to the credit of a guarantor of a company's obligations under a charter party. The statement was contained in a telex sent by the bank from New York to shipowners in London. At first instance the judge set aside leave to serve out of the jurisdiction. The Court of Appeal allowed the appeal. Ackner L.J. (subsequently Lord Ackner) observed (at 94):

". . . the jurisdiction in which a tort has been committed is prima facie the natural forum for the determination of the dispute.

"England is thus the natural forum for the resolution of this dispute."

Goff L.J. (who became Lord Goff of Chieveley) observed (at p. 96)

"Now it follows from those decisions that, where it is held that a court has jurisdiction on the basis that an alleged tort has been committed within the jurisdiction of the court, the test which has been satisfied in order to reach that conclusion is one founded on the basis that the court, so having jurisdiction, is the most appropriate court to try the claim where it is manifestly just and reasonable that the defendant should answer for his wrongdoing. This being so, it must usually be difficult in any particular case to resist the conclusion that a court which has jurisdiction on that basis must also be the natural forum for the trial of the action. If the substance of an alleged tort is committed within a certain jurisdiction, it is not easy to imagine what other facts could displace the conclusion that the courts of that jurisdiction are the natural forum."

There is also direct support for this approach before and after The Albaforth: see Distillers Co. (Biochemicals) Ltd. v. Thompson [1971] A.C. 458 (P.C.), at 468E; per Lord Pearson; Metall und Rohstoff A.G. v. Donaldson Lufkin & Jenrette Inc. [1990] 1 Q.B. 391, a Court of Appeal decision subsequently overruled in Lonrho Plc. v. Fayed [1992] 1 A.C. 448 on other aspects; Schapira v. Ahronson [1999] E.M.L.R. 735. The express or implied supposition in all these decided cases is that the substance of the tort arose within the jurisdiction. In other words the test of substantiality as required by Kroch v. Rossel was in each case satisfied. Counsel for Forbes argued that a prima facie rule that the appropriate jurisdiction is where the tort was committed is inconsistent with Spiliada. He said that Spiliada admits of no presumptions. The context of the two lines of authority must be borne in mind. In Spiliada the House examined the relevant questions at a high legal of generality. The leading judgment of Lord Goff of Chieveley is an essay in synthesis: he explored and explained the coherence of legal principles and provided guidance. Lord Goff of Chieveley did not attempt to examine exhaustively the classes of cases which may arise in practice, notably he did not consider the practical problems associated with libels which cross national borders. On the other hand, the line of authority of which The Albaforth is an example was concerned with practical problems at a much lower level of generality. Those decisions were concerned with the bread-and-butter issue of the weight of evidence. There is therefore no conflict. Counsel accepted that he could not object to a proposition that the place where in substance the tort arises is a weighty factor pointing to that jurisdiction being the appropriate one. This illustrates the weakness of the argument. The distinction between a prima facie position and treating the same factor as a weighty circumstance pointing in the same direction is a rather fine one. For my part The Albaforth line of authority is well established, tried and tested, and unobjectionable in principle. I would hold that Hirst L.J. correctly relied on these decisions.